Tuesday, July 29, 2014

Trying Out a New iOS Monetization Strategy, First 2 Months Stats

With my latest app, Vima - GPS Run Tracker, I decided to try a new revenue model. To be fair, it's not really a new revenue model, it's just new to me. It's also not very common for mobile apps. It might be a big ask, but I made the app free with an IAP for premium features that is recurring either monthly or yearly instead of just a 1 time purchase. It is not automatically recurring, partly because that would feel dirty, and partly because it would be tough to get Apple to approve it. If a user wants the premium features, they have to click the button again each month (or year).

The reason for trying this is simple. I'm trying to build a sustainable business. Hopefully one where I can eventually hire employees etc. That is really hard to do as an indie app developer as noted by some popular recent posts here and here. I've been on my own for over 3 years now, which frankly feels like a pretty big success by itself, but it is definitely harder to succeed now that it was in the beginning. There are a lot of indie devs that are either eating ramen, or they are back at a 9-to-5. While I've been able to exceed my salary at my first job out of college, I haven't quite gotten to that next level of huge indie success. I've just made a nice lifestyle business out of it thus far.

Getting to the next level means taking some chances. I'm going to try new ideas and new monetization strategies. The first of which is the subscription model. I've spent a lot of time on this latest app, and so has my designer (freelance, but I really wish I could hire him full time). That being said, we can't continue to spend all of our time improving it and updating it unless we can convince people to pay us for that time. People have been paying subscriptions for software for a long time. I don't see why it would be unreasonable to do the same for mobile apps. Just a tiny fee each month ($0.99 in our case, or $0.50 if you pay $5.99 yearly). Users give us a little bit of money each month so we can eat and stuff, and in exchange we give them a great piece of software that solves a problem in their life.

Of course, that sounds great in theory, but how does it work in the real world where you have to convince people to part with their hard earned cash? The moment you've been waiting for, numbers and graphs! It actually has worked better than I expected. Of course, I set the expectations bar pretty low for this. It's nowhere near something that can sustain me or other employees yet, but it's a decent start for an experiment.

Downloads : 22,305

Best Day: 458

Average Day: 323

1 Month Upgrades: 245

1 Month Upgrade Profit: $171.22

1 Year Upgrades: 243

1 Year Upgrade Profit: $1021.79

Combined Upgrades: 488

Total Profit: $1193.01

Conversion rate to any paid - 2.19%

Downloads

User Sessions

This user session graph is the one that actually gets me a little bit excited. We are having pretty good retention numbers. People like the app, and they are using it consistently. Our downloads aren't where I want them to be, but they are higher than many many apps on the store.

Our conversion to paying users is better than I expected. Everything I've read says that good numbers are between 1-5%, and only the best of the best get anything on the top end. Considering there is only 1 thing to buy, and it isn't a 1 time purchase, I think > 2% conversion is pretty good.

Obviously 500-600 dollars a month isn't going to allow me to retire anytime soon so where do we go from here? There are lots of questions that remain to be answered. 2 months is really too small of a sample size to find out how well the recurring part of this equation is working. The conversion rate is very promising in my opinion, and there have been people re-subbing after their first month, but I haven't done the math to see how many. At this point there just aren't enough people who have hit that point to give really meaningful data.

Frankly it won't be that meaningful until we get out 6-12 months from now. As long as we keep some percentage of new users each month the number should go up. Of course, less people run in the winter so I fully expect some of the numbers to go down, but I'm really interested to see what happens next spring/summer. Will people still be using the app in a years time? Will we have 12 months worth of users subbing, including some people re-upping on the yearly subscription? I have no idea, but I'm interested in finding out.

The biggest key to the overall success of the app is going to be getting the download number up. I'm pretty happy with the recurring experiment so far. The conversion rates are similar to what I've seen on cheaper 1 time purchase apps. Once you convince people to pay you anything, convincing them to pay a little bit more doesn't actually seem to be that hard. The problem is getting more and more people to find the app in the first place.

So far, we haven't put much money into promotion, just a few tiny test campaigns on Admob to get a feel for click through rates on different ads and a small Twitter promotion to try out their new targeting options. This next month we are planning on wading a little bit deeper to try and find a way to increase the downloads further. I've got a few outside of the box ideas as well as few other ad networks to try including Facebook.

It's really hard to advertise with an ARPU of 5 cents, but you have to keep in mind that you don't necessarily have to have a measurably positive ROI for the advertising to make sense. Increasing downloads helps on so many different levels. More downloads means you get higher rankings in the search results and in the top category and overall rankings. Higher rankings means more organic downloads. More downloads means more users to share your app on social media and other offline word of mouth methods. This also creates more organic downloads. Finally, more users means more reviews, which are key to converting people once they find you in the store.

I hope I can find ways to increase my ARPU in the future. There are several possibilities for this including adding ads (currently even the free version is ad free other than promotion of the premium upgrade). Another option we've considered is adding a store to sell branded items such as clothing or car magnets. While I wouldn't expect huge conversions, every little bit helps. This would also be a method of advertising any time someone wears a shirt or puts a magnet on their car. Getting people to pay you to spread the word about your app seems like a huge win, even if not that many people ultimately do it. Also, there is certainly the hope that the ARPU will naturally rise somewhat over time as people upgrade multiple times.

All that being said, obviously I can't be too excited about several dollars for acquiring a user. That won't be profitable ever. I'll have to find ways to get conversions for less than $0.50 before I'll consider putting more money into a certain area, and probably less than $0.25 before I'm excited about putting more money there. We'll see how that goes in the coming months, but that's for another blog post.

Conclusion

For those jumping to the bottom to get the cliff notes version:

1. We've been able to get a ~2.19% conversion from free users to paid for either monthly or yearly access to premium features of our app. Overall I'm happy with this rate, and it compares favorably with other apps. It seems once you convince someone to pay you, it's not that hard to get them to pay slightly more.

2. We don't have enough downloads to make this sufficient to sustain 1 or more employees. Thankfully it isn't the only app in my portfolio. A handful of apps making 500-1000 dollars a month can sustain 1 person easily. That being said, I'd prefer to have a smaller number of apps making significantly more consistently. To build something more than a lifestyle business an app or suite of apps needs to be significantly more profitable. To continue providing major updates an app needs to make more than a few hundred dollars a month.

3. The next step is finding ways to raise our ARPU, and more importantly finding more users.

If you've read this far and are interested in the mobile app market you may want to check out my book on how I make money on the mobile app stores called Building an App Business.